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Taming Inventory Management with an ERP – Part 1

The Big Inventory Problem

Every manufacturer, small or medium or big, would have faced or currently facing this problem of unable to tame the magnanimous giant called Inventory. Imagine a scenario where the entire shop-floor is on standby with machines and personnel staying idle, thereby increasing the queue of the jobs. An emergency procurement of raw materials has been placed with your suppliers but of course, that will take time.

Your customers are slowly running out of patience as this is not a one-time occurrence but a recurring activity. The reputation that you have built for yourself over the years is slowly diminishing. All because, there weren’t enough materials in hand to manufacture or assemble the product.

Inventory Under stocking

Inventory control and management might be one of the cogs of a manufacturer’s wheels but it has a profound effect on other aspects of manufacturing. Picture this,

As a manufacturer, if you have limited or no visibility of how much inventory is available on-hand, you cannot schedule your jobs as you are not sure of the quantity required to initiate production. Even if you have had enough quantity to begin with, your personnel will have to resort to physical inventory counts to be certain. This will lead to materials landing up late on the shop floor, thereby delaying jobs, and laying to waste, your promise of delivering the end product to your customer as per the requested due date.

All this means, a very unhappy customer. On top of it, overhead costs increase as you would have had to pay more to your suppliers and shipping for urgently transporting the materials to you. This cost adds up to your increasing production costs owing to overtime of personnel and machines, thereby slicing away your precious margins.

Inventory Overstocking

Inventory problems are not only limited to under stocking but also overstocking. In order to ensure that the above-mentioned issues aren’t repeated, you resort to over-purchasing of materials or parts as a knee-jerk reaction. Stocked inventory is nothing but held up cash and if you are not sure of adequate future orders that will use up those materials, that would mean your precious cash is stuck at your warehouse.

Product Traceability

Lack of inventory visibility means you cannot trace materials and parts right from their procurement from the supplier till it goes into the final product. That means, if a product batch has a defect and it is identified after the products have reached your customers, then it will be a gargantuan task tracing the defect to the exact inventory batch of raw material or parts.

If you see your shop floor personnel constantly scrambling over storage shelves and warehouse to find the exact number of inventory, your jobs held up due to unavailability of a single small part, then it’s time to make that much-needed technological change for your manufacturing enterprise.

Switch to an ERP!

Stay tuned for our next blog to know how an ERP helps you tame Inventory Control and Management with ease and efficiency.